EARN Conference Milwaukee, WISept. 13, 2011

Economic Development in Hard Times:TIFs, CAPCOs and Other Bad Ideas

Deborah HowlettPresident

“Business needs to be hugged and loved.”

NEW JERSEY GOVERNOR CHRIS CHRISTIE

Quoted by The (Newark) Star-Ledger from an Oct. 9, 2009, campaign appearance in East Windsor with the New Jersey Builders Association.

FOUR MAJOR NJ TAX SUBSIDIES

Business Employment Incentive Program (BEIP)

Business Relocation and Retention Assistance Grant (BRRAG)

Urban Transit Hub Tax Credit (UTHTC)

Economic Redevelopment Grant (ERG)

A SURGE IN SUBSIDIES

$822 MILLION IN LESS THAN 18 MONTHS

70 AWARDS TO DEVELOPERS OR CORPORATIONS

$400 MILLION MORE SINCE

TWO ARE TIED TO JOBS

• BEIP and BRRAG are tied to job creation.Job creation data is mainly left up to the corporations to report

• BEIP $47.6 millionDiverts to the employer about 80 percent of income tax from newly created jobs for 10 years

• BRAGG $29.2 millionGives a $3,000 per job tax credit for new or retained jobs (minimum) 50 employees

ERG

• A subsidy to encourage development or redevelopment

• Developers receive up to 75% of annual incremental increase in state or local tax revenues

• Award can apply to 19 different taxes and may extend as much as 20 years

• State has award $351 million in ERG grants

GAMBLING ON REVEL CASINO• $261.4 million ERG

grant, largest ever by the state

• 2,000 construction jobs

• Project scaled back to about half its original size• Front-loaded grant allowed the developer to

leverage $1.9 billion in financing from private banks• Casinos in the worst market since gambling was

legalized in 1972

URBAN TRANSIT HUB TAX CREDIT

• Predicated on good ideas: Transit Oriented Development and infill development

• Tax credits for businesses that locate within a half-mile radius of transit station in nine cities

• Makes available up to $1.5 billion in subsidies• Can carry over credits for 20 years or sell them• First exception: Camden – Radius changed to

¾ mile from transit center, which will include Campbell’s Soup headquarters

• Campbell’s awarded $41.2 million in March to finish a renovation of its Camden headquarters

• As part of its application, Campbell’s promised to hire 45 new employees

• Three months later, Campbell’s announced company wide layoffs, including 130 Camden HQ employees

• Campbell’s can keep the state grant despite layoffs

TRANSIT HUB TAX CREDIT WASM-M-M GOOD

UTHTC EXPANDED IN 2011, TOO

• To include port operations, such as Newark airport and the Port of Camden, adjacent to eligible cities

• To include the area of the Meadowlands where new super mall, American Dream at Meadowlands, is to replace foundering Xanadu development

• Up to $350 million in state tax credits, mainly from increased sales tax revenues

• Up to $300 million in tax-free bonds tied to revenue from 8,000 parking spaces

• Up to $300 million in bonds on future property taxes

• Deal struck in June but plan has been made public

American Dream at the Meadowlands

CONTACT INFORMATION

NEW JERSEY POLICY PERSPECTIVEDeborah Howlett, President

howlett@njpp.org609.393.1145 ext 18

www.njpp.org